A company’s cash flow statement for the year ended 31 March 2026 (all amounts in ₹ thousands) is prepared using the indirect method with the following data: Profit before tax = 1,800 Depreciation = 90 Interest received = 35 Loss on sale of plant = 20 Dividend received = 25 Increase in inventories = 130 Decrease in trade receivables = 70 Increase in trade payables = 110 Purchase of plant (cash) = 400 Proceeds from issue of debentures = 500 Tax paid (cash) = 210 Prepare the cash flow statement showing cash flows from operating, investing and financing activities and compute the net increase in cash and cash equivalents.

Step-by-step solution

1. Start with profit before tax: ₹1,800.
2. Add back depreciation (non‑cash expense): ₹1,800 + ₹90 = ₹1,890.
3. Add loss on sale of plant (non‑cash loss): ₹1,890 + ₹20 = ₹1,910.
4. Add interest received (operating cash inflow): ₹1,910 + ₹35 = ₹1,945.
5. Add dividend received (operating cash inflow): ₹1,945 + ₹25 = ₹1,970.
6. Subtract increase in inventories (cash used): ₹1,970 – ₹130 = ₹1,840.
7. Add decrease in trade receivables (cash received): ₹1,840 + ₹70 = ₹1,910.
8. Add increase in trade payables (cash received): ₹1,910 + ₹110 = ₹2,020.
9. Subtract tax paid (cash outflow from operating activities): ₹2,020 – ₹210 = ₹1,810.
10. Operating cash flow = ₹1,810.
11. Investing activities: cash outflow for purchase of plant = –₹400.
12. Financing activities: cash inflow from issue of debentures = +₹500.
13. Net increase in cash = Operating ₹1,810 + Investing (‑₹400) + Financing ₹500 = ₹1,910.
14. Since figures are in thousands, the net increase equals ₹1,910,000.

Concept tested: Cash flow statement – indirect method

Published 28 September 2026 · How this solution was prepared and checked